* 5,000 PPI complaints coming in each week * Expects PPI complaints to continue for next few years * Struggles to match pay offered to PPI staff by banks * Raises referral fees for banks by 50 pounds per case * Rise in complaints about payday loans, packaged accounts By Matt Scuffham LONDON, Jan 10 (Reuters) - Britain's financial ombudsmanservice is taking on 1,000 new staff this year to deal with agrowing backlog of complaints over mis-sold loan insurance,which have far exceeded its expectations. The service, which steps in when banks and their customerscannot reach an agreement, said on Thursday it was getting over5,000 cases a week but resolving only about 3,500, leaving itwith a backlog of a quarter of a million outstanding complaints. Banks have set aside more than 12 billion pounds ($19billion) to compensate customers wrongly sold payment protectioninsurance (PPI) following the worst mis-selling scandal inBritish history. Deputy Chief Ombudsman Tony Boorman said many financialinstitutions were not dealing effectively with claims and weresubjecting their customers to "delays and inconvenience". "It's disappointing that we're still seeing significantnumbers of unresolved disputes about mis-sold policies beingreferred to the ombudsman," Boorman said on Thursday in a reportoutlining the service's plans for the year ahead. The ombudsman said it was losing money as a result of thecosts of dealing with the complaints and had struggled tocompete with the wages offered by banks, which were alsorecruiting heavily to expand teams dealing with PPI claims. The ombudsman's latest recruitment drive will bring itstotal number of case workers up to 3,500, after 1,000 new hireswere taken on last year. To offset that, it is raising fees charged to financialservices firms when cases are referred to the ombudsman. The feewill rise by 50 pounds ($80) to 550 pounds. Additional feescharged specifically on PPI cases will be kept at 350 pounds. Some 245,000 new PPI cases have been referred since lastApril, 54 percent above the ombudsman's forecast 165,000 for theentire year to March 2013. PPI now accounts for two-thirds ofits workload and the ombudsman said it expects to receive about250,000 new cases in the year to March 2014. PPI is the most complained about financial product ever inBritain, with the ombudsman receiving its 500,000th case lastOctober. The second highest is mortgage endowments, about which350,000 complaints have reached the ombudsman. The policies were meant to protect borrowers who foundthemselves out of work because of sickness or redundancy butwere often sold to customers who did not want or need them. The ombudsman said the overall levy paid to it by Britain'sfinancial services firms to contribute to its costs will rise to23 million pounds from 17.7 million previously. However, the number of cases which institutions are allowedto have referred free of charge has been increased to 25 from 3previously. The ombudsman said that will ensure the businesseswhich are most responsible for generating the increased workload contribute the most to sorting it out. The ombudsman said it expected to continue to receive largenumbers of PPI complaints for the next few years. The new staffwill be recruited on three-year fixed term contracts, it said. Away from PPI, the ombudsman said it was seeing more casesabout so-called "payday loans". Many customers have complainedthat the loans are unaffordable or about methods used by lendersto get their money back. It has also seen an increase in cases relating to "packaged"bank accounts, with customers saying insurance policies providedwith their bank accounts are not suitable for their needs.
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